There are many things in life that are out of our control. We can complain, muse, become paralyzed - or we can choose to find and capitalize on the opportunity. What comes to mind is the Affordable Care Act and the concern, worry and anxiety that it has created for many.
I harken back to 1993 in California. The state legislature had just passed AB 1672, small group reform legislation that was to go into effect July 1, 1993. Prior to the legislation all small group plans in California required underwriting. Carriers could decline new cases, thus requiring employers to stay with the current carrier or be unable to obtain coverage at all. Carriers could charge whatever they deemed appropriate for renewals and 60%, 70%, 80% renewal increases were possible - and frequent.
There was no relationship between new business rates and renewal rates, thus allowing carriers to cherry pick the healthy, more profitable cases and decline or charge substantially higher premiums for less healthy or less desirable industry groups.
The legislation provided guaranteed issue to groups from 2-50. New business and renewal rates were the same. The maximum pricing variation from the healthy to unhealthy groups was 20%. HIPC was established as a state-run exchange with no broker participation. It was a multi-carrier platform with consolidated billing. It included an administration fee.
The industry concern was that rates would explode, agents would be negatively impacted by the exchange and, for many, the future looked bleak. The reality was the ability for unhealthy, uninsured groups to obtain affordable coverage, existing groups the ability to change carriers without negative financial implications and the realization by the exchange, in 1995, that they needed us to market and explain the complexities of the exchange. Ironically, in 1997 the exchange ceased to exist, as it could not compete in the open market.
For those of you in Pennsylvania, New York, Illinois and other states where small group reform is needed, the ACA could be a blessing. In my humble opinion, there will always be opportunity for those of us that bring value to our clients.
Recently, in Louisville, Ky., I had dinner in the hotel while on a business trip and I had the good fortune to meet Chef Dwight. It was a quiet night and he stopped to chat. I spoke of my meeting that day with the management team of the largest rehab facility in Louisville. I shared the passion and commitment they all had for the impact they had on the lives they served.
Dwight quietly shared his story. He was a recovering alcoholic and had been sober for 10 years. He talked about the pain he had inflicted on his family and loved ones. He shared how his friends had tried to get him to seek help, but he wouldn't. Finally, he hit bottom and saw his life as empty, hopeless with no future. He sought help and has been sober ever since. His message was, "Either you make the change, or the change will make the change."
What a profound statement. We are not dealing with a personal life-or-death issue, but possibly a business one. The cards have been dealt - how are you going to play your hand?
Reach Torelli, CLU, ChFC, MSFS, and president of California firm e3 Financial, at andy@e3Financial.com.
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